Nalivka: Using Genetic Merit as the Basis for Pricing Feeder Cattle & Calves

I previously wrote about how marketing value-added beef products impacts processor margins.  That same value-added strategy can extend further down the into the production end of the supply chain.  Many cattlemen are already benefitting from value-added marketing through value-added production.  The basis for that value-added production is genetics and that is not a profound statement!

The foundation for consumer beef demand is not just quality, but consistent quality.  Consumers want the assurance that the beef product they purchase today will be of the same quality as the beef they purchased last week.  And, the same holds true for that steak they ordered in a restaurant.  This is especially true in today’s market of record high prices.  So, how does the industry make that quality assurance?  The answer begins at the production end of the supply chain and is highly correlated to genetics.  Ask any cattlemen raising Angus cattle with quality genetics and marketing Certified Angus Beef.

So, the industry is now at the point to extend the Angus benefit even further and this is goal of the Genetic Merit Pricing Task Force.  That is, for an industry-based task force to develop and provide information and education to the industry on the potential benefits of using genetic merit as the basis for pricing feeder cattle and calves.  Going beyond the grids, formulas, and hide color currently used to price fed cattle, this is a major step forward and in bringing the same genetic basis further down the chain to the cattlemen raising calves and feeder cattle.

The U.S. beef industry is the most efficient beef production in the world.  However, as I indicated in my last article, the economic environment for both production and marketing is rapidly changing and the entire industry supply chain must adapt.  And, adapting to change in this evolving economic environment will include not only production but also marketing.  Genetics form the foundation for assuring a quality product that can be produced at optimal cost.  But, most important for cattlemen integrating the right genetics into their herd will be to realize pricing in a market that recognizes the value of those genetics.  This is genetic merit pricing - producing the “right cattle for the right market” and being compensated accordingly.   It will require work, but it will benefit the entire beef industry.